Bitcoin halving explained: Price & future impact?

The Bitcoin halving event unfolds in five distinct phases, each influencing market dynamics. From the pre-halving anticipation to the post-event parabolic surge, understanding these stages is essential for investors.

This article discusses each phase of the Bitcoin halving event, shedding light on the behavioural patterns, price fluctuations, and market sentiment.

bitcoin halving cycle

The year 2024 is poised to be a crucial year for the cryptocurrency sector, particularly for Bitcoin. We have eagerly awaited the approval of Bitcoin spot ETFs in the US, and in April, the upcoming BTC halving is anticipated, marking a halving of the block rewards for miners.

The halving is a highly anticipated event within the crypto community, traditionally catalysing an upswing in BTC prices due to the increased scarcity resulting from the reduced block rewards.

What does bitcoin halving mean?

The Bitcoin halving is a scheduled event in the protocol that halves the block reward for miners validating blocks. As previously explained, the objective is to decrease BTC issuance, control inflation, and ensure a stable and limited currency supply. This automatic process occurs every 210,000 blocks, approximately every four years.

Halving over time

When Bitcoin commenced in 2009, each block contained 50 BTC. The first halving in 2012 reduced the reward to 25 BTC per block. The second halving in 2016 lowered the issuance to 12.5 BTC, and the third in 2020 set the issuance at the current 6.25 BTC per block. Consequently, the next halving will reduce the reward to 3.125 BTC. Halving will continue every 210,000 blocks until the final cycle concludes in 2144.

When is next bitcoin halving?

The next Bitcoin halving is expected to occur on May 4, 2024, when the block height reaches 840,000. During this event, the reward for mining a Bitcoin block will be reduced from the current 6.25 bitcoins to 3.125 bitcoins.

when is the next bitcoin halving date

How does halving affect Bitcoin?

Beyond diminishing BTC issuance and controlling inflation, halving impacts mining profitability. Miners receive fewer bitcoins for their work due to the halving of rewards. This may be detrimental in regions with high electricity costs, rendering mining unprofitable. Stopping the mining activity could jeopardise the stability and continuity of the BTC network. However, in the long term, it can be profitable for miners, as the reduction in rewards may be offset by the increased value of the mined cryptocurrencies if the BTC price rises.

Halving can also heighten BTC volatility. The reduction in circulating BTC increases demand, prompting rapid trader responses and resulting in price fluctuations. Notably, volatility isn't necessarily negative, as some users can leverage it for Bitcoin options trading.

Finally, Bitcoin exerts an undeniably positive influence by sparking increased interest in cryptocurrency. This event, coupled with the ensuing changes, attracts more individuals to Bitcoin, fostering its adoption.

Five phases of Bitcoin halving

Phase 1: pre-period

This phase starts approximately 6 months before the halving event and is marked by an upsurge in buying activity and heightened demand. Users aim to accumulate or derive performance benefits in anticipation of the impending event. During this period, there is typically a growing media interest in Bitcoin, attracting new users to discover Bitcoin and other cryptocurrencies.

Phase 2: buy the rumour

This phase usually occurs around 60 days before the halving and is characterised by a substantial rise in the price of BTC, driven by factors identified in the preceding phase. Media attention and anticipation motivate traders to purchase BTC, leading to increased cryptocurrency prices. In this phase, the price of BTC often reaches levels close to or even surpasses its all-time high.

Phase 3: sell the news

Following the surge caused by volatility and before the halving, there is typically another period during which the price falls – known as “sell the news.” Traders aim to profit from the gains obtained in the previous phase, combined with the sale of BTC by miners and market uncertainty with the arrival of inexperienced investors. It is crucial for users to stay informed during this period, as volatility remains high, leading to aggressive fluctuations in the price of BTC.

Phase 4: accumulation

This phase can extend beyond the event and occurs immediately after the previous one. Users take advantage of the price drop to accumulate again. The price of BTC moves horizontally, forming a consolidation pattern. This process reduces the available supply, contributing to another price increase. Volatility decreases during this period, creating a sense of ‘stagnation.'

Phase 5: parabola

The final phase is usually a bullish parabola, where interest and demand for Bitcoin reach their highest points, propelling the price to unprecedented levels. This parabola is typically triggered by increased adoption and a generally positive sentiment surrounding Bitcoin. Trading volume and investor activity, both retail and institutional, peak during this phase. Despite the euphoria, caution is advised during this period of speculation, as prices often reach historical highs.

As always, if you intend to acquire Bitcoin in preparation for the next halving, ensure to do so on a reliable and secure platform that prioritises transparency, cybersecurity, and customer protection, such as Bit2Me or one of the best brokers for crypto.

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Conclusion

The Bitcoin halving is a scheduled event that significantly impacts the cryptocurrency market. From heightened anticipation and trading strategies to post-halving consolidation and parabolic peaks, investors must navigate these phases strategically.

FAQs

What is the primary purpose of Bitcoin halving?

Bitcoin halving is designed to control the issuance of new bitcoins, ensuring a gradual and predictable supply. This mechanism helps maintain the scarcity of Bitcoin, a fundamental aspect of its value proposition.

Does halving impact transaction fees on the Bitcoin network?

Yes, over time, the reduction in block rewards may lead to an increased reliance on transaction fees for miners. This dynamic could influence the cost and speed of Bitcoin transactions.

How does the halving impact long-term Bitcoin holders?

Long-term holders may benefit from the halving as reduced supply often correlates with increased demand. The potential for a post-halving price surge could result in a higher valuation for long-term holders.

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